United States District Court, D. Minnesota
Unger, Esq., Jonathan Baker, Esq., Matthew T. Boos, Esq., and
Richard D. Snyder, Esq., Fredrikson & Byron, PA,
Minneapolis, MN, on behalf of Plaintiff.
Anthony J. Alt, Esq., Bradley M. Jones, Esq., and Jeffrey M.
Thompson, Esq., Meagher & Geer, PLLP, Minneapolis, MN, on
behalf of Defendant.
MEMORANDUM OPINION AND ORDER
MONTGOMERY U.S. DISTRICT JUDGE
March 20, 2019, the undersigned United States District Judge
heard oral argument on cross motions for summary judgment of
Defendant Allied World National Assurance
(“Allied”) [Docket No. 71] and Plaintiff Tile
Shop Holdings, Inc. (“Tile Shop” or
“TSH”) [Docket No. 120]. For the reasons set
forth below, Allied's motion is granted and Tile
Shop's motion is denied.
The Insurance Policies
Shop Holdings, Inc. was incorporated on June 21, 2012. Ex.
39. In preparation for offering public
stock and securities for the new entity, Tile Shop purchased
primary and excess Directors and Officers
(“D&O”) insurance policies. Tile Shop
purchased its primary coverage from a member company of
American International Group, Inc. (“AIG”)
(“Primary Policy”), and an excess policy from
Allied (“Excess Policy”). The effective date for
both policies is August 20, 2012, for a term of one year.
Both policies renewed for a second one-year period beginning
August 20, 2013, with the same policy terms.
policies include prior act exclusion clauses. The Primary
Policy's exclusion clause is found in Endorsement #10:
In consideration of the premium charged, it is hereby
understood and agreed that the Insurer shall
not be liable to make any payment for Loss
in connection with any Claim made against an
Insured alleging any Wrongful
Act occurring prior to August 20, 2012 . . . .
Loss arising out of the same or related
Wrongful Act shall be deemed to arise from
the first such same or related Wrongful Act.
Ex. 15-48 (emphasis in the original). Tile Shop paid $146,
040 for the Primary Policy with the Prior Acts Exclusion
clause. Without the exclusion clause, the price would have
been $220, 000. Exs. 28-3; 46-3.
Excess Policy follows form, referencing the Primary Policy
and that policy's $10 million dollar policy limit. Ex.
14-1. The Excess Policy's exclusion language is found in
Clause II, Terms and Conditions, C., “Pending or Prior
Exclusion, ” stating “This Policy shall follow
any exclusion in the Primary Policy . . . .” Ex. 14-14.
But, additional exclusion language is found in Endorsement #2
of the Excess Policy. Allied “amended by adding the
following exclusion” terms:
Prior Acts Exclusion This Policy shall not cover any Loss in
connection with any claim alleging, arising out of, based
upon, or attributable to any wrongful act(s) committed,
attempted, or allegedly committed or attempted prior to
August 20, 2012 . . . .
Ex. 14-4 (Endorsement #2). Tile Shop paid $90, 500 for the
Excess Policy with the Prior Act Exclusions language. Without
the exclusion clause, the price would have been $135, 000.
Exs. 45-3; 47-2.
Act” is defined in the Primary Policy as:
(1) any actual or alleged breach of duty, neglect, error,
misstatement, misleading statement, omission or act...:
(i) with respect to any Executive of an Organization, by such
an Executive in his or her capacity as such or any matter
claimed against such Executive solely by reason of his or her
status as such; . . .
(2) with respect to an Organization, any actual or alleged
breach of duty, neglect, error, misstatement, misleading
statement, omission or act by such Organization, but solely